Self-employed individuals, sole traders, partnerships and others required to complete a Self Assessment will need to be aware of new rules that affect the way in which your profits are calculated and taxed.
These new rules are due to come into effect in April 2024, with this year being a transitional year, and will affect all those whose accounting year differs from the tax year. In this blog post, we’ll cover the new rules, who they will affect and where you can get help calculating how much tax you owe.
What are the new rules and who will it affect?
From April 2024, a new basis period reform will come into force which means that all self-employed profits will be calculated in tax years, even if your accounting year ends at a different time of year. If your accounting year ends between 31 March and 5 April then you can continue to report your profits as before, but any individuals with an accounting year that ends outside of these dates will be subject to the new rules.
It’s also important to note that, in order to prepare for these changes, this year (the 2023–2024 tax year) is a transitional year and profits will be calculated from the first day of your accounting year up until the end of the 2023–2024 tax year on the 5 April. So, for example, if your accounting year ends on 31 January then for this year you’ll be taxed on profits from 1 February 2023 to 5 April 2024. This could therefore unfortunately mean a larger tax bill for many individuals this year. If you do have any overlap relief then this can help to reduce the tax that you owe, and it’s vital that you do claim any unused relief for this tax year otherwise you will lose it completely.
Where can you get help calculating your tax bill? And is there anything you should be doing to minimise any disruption?
Here at Warr & Co, working with sole traders and partnerships is one of the things we do best. We’re proud to offer unique, comprehensive services to hundreds of business owners all over the UK, and most importantly we tailor make our services for each and every client so that you can get exactly what you’re looking for.
We’ll help you calculate your tax bill, utilise any relief that you’re entitled to and help you make your money work smarter for you. You may also wish to consider aligning your accounting period with the tax year to make your reporting more straightforward in the future, but our team of experienced accountants can discuss this with you and help you come to a decision that’s right for your business.
For further information, please visit our Accounting Services For Sole Traders And Partnerships webpage or book in for a free, no-obligation consultation with a member of our team now.